FrostCloud Forums  

Go Back   FrostCloud Forums > Politics > Politics and World Events


Politics and World Events A place for all you liberals, conservatives, and even radicals.

Thread Tools Rate Thread Display Modes
Old 07-27-2010, 11:24 PM
ArghMonkey's Avatar
ArghMonkey ArghMonkey is offline
Join Date: Mar 2004
Posts: 14,434
Credit card fees transfer wealth to rich, study finds

Credit card fees and rewards programs exacerbate income inequality by acting as a transfer of wealth from poor to rich, according to a Federal Reserve Bank of Boston study released Monday.

The researchers argue that reducing card rewards and merchant fees "would likely increase consumer welfare."

Merchants usually don't charge different prices for card users to recover the costs of fees and rewards, but instead, mark up the prices for all consumers.

As a result, people who pay cash -- and who are more likely to be lower income -- end up subsidizing those who pay by credit card.

U.S. consumer finance data shows that people on a low income are less likely to have a credit card, and those who do, spend less a month on average, than higher earners. High-income consumers are also 20 percentage points more likely to receive credit card rewards -- be they frequent flier miles, cash back or other enticements.

"What most consumers do not know is that their decision to pay by credit card involves merchant fees, retail price increases, a nontrivial transfer of income from cash to card payers, and consequently a transfer from low-income to high-income consumers," Scott Schuh, Oz Shy and Joanna Stavins wrote.

They found that about 83 percent of banks' revenue from credit card fees is obtained from cash payers "and disproportionately from low-income cash payers."

After accounting for rewards paid by banks, households who earn more than $150,000 annually receive a subsidy of $756 on average every year, while the households earning $20,000 or less pay $23.

Financial regulatory reform signed into law last week gives the Federal Reserve responsibility for regulating fees associated with debit, but not credit, cards.

The researchers said that the transfer of wealth highlighted by their study "may be a concern that U.S. individuals, businesses or public policy-makers wish to address."

They suggest that if merchants and banks don't take steps to reduce the wealth transfers, policy-makers could mull ways to push different pricing depending on the payment method, more transparency on fees, or regulating fees and rewards.

Dragon busted on his lies ... HERE!


"I am quite sure now that often, very often, in matters concerning religion and politics a man's reasoning powers are not above the monkey's - Mark Twain

Reply With Quote
Sponsored Links


Thread Tools
Display Modes Rate This Thread
Rate This Thread:

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Let's Elicit Something for an Apple 'Enjoy' and Take your Time, Make Alot of Copies. Neftel Leli Creative Writing and Artwork 1 10-14-2008 11:56 PM
The Dow fell 504 points on Sept 14th ArghMonkey Politics and World Events 30 09-29-2008 12:26 AM
Critics urge Congress to rein in credit card companies ArghMonkey Politics and World Events 7 01-30-2007 08:29 AM
Tax Cuts Offer Most for Very Rich, Study Says ArghMonkey Politics and World Events 9 01-13-2007 09:34 PM
Is "MAN" = "A GOD" TruthInArt General Philosophy 54 02-04-2005 04:22 AM

All times are GMT +1. The time now is 01:28 AM.

Powered by: vBulletin
Copyright 2000-2008 Jelsoft Enterprises Limited
Hosted and Maintained by The IceStorm Network